Comments on: The 10% Flat Fee: Yay or Nay?

By: Neil McNulty

Neil McNulty — Thu, 09 Jul 2009 23:12:36 +0000

I have read the bio. It is very impressive. But selling search and placement is far different than selling franchises or financial services…things he was a superstar doing. I wish him success because he has the guts to enter this business but, with over 25 years at this, I have seen this model (or very similar variations) at least ten times before. Zero succeeded. However, they also told the Wright brothers that if man was intended for flight…

At the end of the day, cash flow is oxygen, and fees between 20 and 30 percent are the entire survival spectrum based upon this industry’s 60+ years of trial and error. At 20 percent, a firm barely covers costs at two placmeents per desk per month.

By: Dave Staats

Dave Staats — Tue, 07 Jul 2009 11:11:07 +0000

If someone is providing value ,covering costs and making a profit then the numbers don’t matter a lot. My own prejudice has me too lazy to sell 30%,absolutely committed to 25% with an engagement fee,willing to do 25% contingency if I do not have to source and scornful of 20%ers and amused by anything less. But that’s just me…
The only disturbing thing about any of this is that I know a chunk of the oddball pricing models are put forth by people too lazy or too stupid to sell the value of what they do. That’s when it bugs me…yet, I know there’s some guy somewhere who’ll think this about what I just wrote. Que sera sera.
As Harry says though…taking on risk makes money…It is just gambling albeit experience is a good trainer for what to gamble on. Look at the insurance industry…

By: Harry Joiner

Harry Joiner — Mon, 06 Jul 2009 23:30:25 +0000

We are not talking about reducing fees here. We are simply talking about 1.) taking some of the client’s risk out of the transaction, and 2.) making the deal affordable. Do what you want — but history’s greatest marketers (Jay Abraham, Rosser Reeves, David Ogilvy, Gary Halbert, etc) have long preached the gospel of “risk reversal” to increase one’s business.

Peace,
MarketingHeadhunter.com

By: Eric Egler

Eric Egler — Mon, 06 Jul 2009 21:21:33 +0000

Interesting topic and discussion. I read an article a few weeks back from David Searns about “microstaffing” which he talks about coming up with unique ways to serve the small business market who may not ever pay a contingency fee due to cost, even though they could use benefit from some level of service. For a small recruiting firm catering to smaller companies, this might serve a niche.

As to pricing, there are many firms out there accepting all sorts of low placement fees, guarantees, etc. in the hopes of getting business. Maybe they are small shops delivering some level of service for their 10, 15 or 20%. Companies who deliver real value to a client will be able to justify 25, 30 or 35%, especially in executive placement where the impact of the placement will be obvious. I’m sure we could do some research and find all sorts of discount offerings out there. I don’t see it as a threat to my business. If the industry were to be put under massive price pressure over time where you had to meet prices to compete, I would see it as a commentary on the lack of value being provided.

By: Tallis

Tallis — Mon, 06 Jul 2009 17:12:07 +0000

Harry is right on the %- it’s (B-A)/A.

However, I would love to see 50 payments coming in at 3% fee. That would make it really affordable for my clients. Or maybe I could do 150 searches a month at a 1% fee, that’s even better….

But seriously, why would 100k in fee be too much? You have a 200mm company with no CEO. There’s a real chance that you could go from a 200mm co down to a 100mm co in a couple of years in this market. And you think spending 100k is too rich to ensure you get the right guy, or at least really increase the chance of that?

By: Harry Joiner

Harry Joiner — Sun, 05 Jul 2009 17:53:42 +0000

Not to split hairs, but a 57% to 50% change is a 12.28% drop in confidence (not a 7% drop). Otherwise, I really like the “Schwelling Method” of pricing — for many reasons — not the least of which is that it allows clients to actually afford my services.

FACT: Heidrick closed 5102 searches in 2007 for an average fee of $114,900. Who has that kind of money? I deal primarily with Fortune 500 companies at the executive level, and trust me, eyebrows get raised when +$50K invoices are sent in.

Besides, the idea that I could get 10-20 of these 10% payments coming in each month is very appealing to me.

Thanks, Schwelling.

Harry Joiner

By: Tallis

Tallis — Thu, 02 Jul 2009 13:04:33 +0000

So it’s not really 10% is it? It’s 20%, with a different refund policy, essentially…. Nice headline.

20% is not that unusual. There are plenty of paper pushers who charge that. They can hire more $12/hour researchers that way.

By: Dave Staats

Dave Staats — Wed, 01 Jul 2009 18:22:19 +0000

I believe the 80s term was low self-esteem…

By: Charles A Haines

Charles A Haines — Wed, 01 Jul 2009 15:19:45 +0000

I am all for being competitive and I appreciate the pay-for-performance model. However you still have to question why they are effectively reducing their feeâ€™s to 20% with a two-year guarantee? Will it net some easy sales? Probably. Will it dislodge a few customers during these tough economic times? Most likely. Will it devalue their service in the eyes or their customers? Absolutely. Will they be able to raise their fees in the future? Unlikely.

That being said, you can always attract attention and business by being the low-cost provider. Historically though it is a short-term strategy that doesnâ€™t work as service wanes and all you are left with are the troublesome customers who only shop on price. Sounds like desperate times are creating desperate measures.